KINSHASA – Mining companies in the Democratic Republic of Congo told the government it will lose more than $3-billion over a decade and face legal action if plans to implement a new industry code proceed.
Miners including Glencore and Randgold Resources are demanding the government abandon aspects of the legislation approved by President Joseph Kabila in March. Discussions about the regulations that will be used to implement the new law concluded earlier this month and the industry says the negotiations failed to address their concerns.
“There can be no ambiguity, from a governmental point of view, as to the intention of the mining companies to protect their rights” if the legislation is applied, a group representing investors including Randgold, Glencore, Ivanhoe Mines and China Molybdenum said in a note submitted April 30 to the Mines Ministry. The note, which hasn’t been made public, was shown to Bloomberg by two people familiar with the negotiations who asked not to be identified.
Mines Minister Martin Kabwelulu declined to comment on the government’s reaction to the note. “The future will decide,” he said by email. The country is the world’s largest source of cobalt and Africa’s biggest copper producer.
By refusing to accept a package of industry proposals made in March, the government may lose more than $3-billion of income from existing copper, cobalt and gold projects “since the mining companies will pursue the application of their rights” contained in the former mining code and “the government will not consequently be able to collect the revenues expected” from the 2018 law, according to the note.
If the code were enacted in its current form, mining companies would suffer major financial losses, which could result in projects under construction being left unfinished and the closure of producing mines, according to the note.
“The claims for damages intended to cover the consequences of the harms suffered will be much higher than the gains that the government can expect from the application” of the new law, it said. “The damages demanded by the mining companies will be payable immediately and in full.”
The mining companies insist the government reinsert a stability clause, present in the former code, which protected license holders from complying with changes to the fiscal and customs regime for ten years. They’ve also asked for the removal of a 50% tax on so-called super-profits and a new categorisation of “strategic substances,” which have a 10% royalty rate.
“The mining companies have confidence in their legal position,” they said in the note, which was written in response to questions from the government about the financial impact of the new law. “The government will not benefit from any of the expected benefits of applying the current version of the Mining Code, since the mining industry will vigorously and collectively reject this application.”